In a Global Economy, a Problem with Using Fiscal and Monetary

question 103

Multiple Choice

In a global economy, a problem with using fiscal and monetary policies to fix the problems in our country is that those policies

• A) are more likely to help other countries than to help us.
• B) become completely ineffective.
• C) make our trade balance deteriorate.
• D) can lead to retaliatory actions by other nations.

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Definitions:

Exchange Rate Appreciation

Exchange rate appreciation refers to the increase in value of one currency relative to another, meaning you need fewer units of the appreciating currency to buy one unit of another currency.

Domestic Deflation

A decline in the general price level of goods and services within a domestic economy over a period of time.

Exports and Imports

Describes goods and services sold to other countries (exports) and goods and services purchased from other countries (imports).

Flexible Exchange Market

A foreign exchange system where the value of currencies are determined by market forces without direct government intervention.